WTO’s Trade Facilitation Agreement comes into effect

The Trade Facilitation Agreement (TFA) in Goods of World Trade Organisation (WTO) came into effect with its ratification by two-thirds members of WTO including India. The TFA in Goods was adopted by the WTO Members in 2014. It aims to streamline, simplify, standardise and ease customs procedures and norms. It will help to cut trade costs around the world.

WTO members concluded negotiations at the 2013 Bali Ministerial Conference on the landmark Trade Facilitation Agreement (TFA), which entered into force on 22 February 2017 following its ratification by two-thirds of the WTO membership. The TFA contains provisions for expediting the movement, release and clearance of goods, including goods in transit. It also sets out measures for effective cooperation between customs and other appropriate authorities on trade facilitation and customs compliance issues. It further contains provisions for technical assistance and capacity building in this area.

Important Points of the Trade Facilitation Agreement (TFA)

The TFA in Goods is the WTO’s first-ever multilateral accord that aims to simplify customs regulations for the cross-border movement of goods. It was outcome of WTO’s 9th Bali (Indonesia) ministerial package of 2013.

Provisions of the agreement:

Lowering import tariffs and agricultural subsidies: It will make it easier for developing countries to trade with the developed world in global markets.

Abolish hard import quotas: Developed countries would abolish hard import quotas on agricultural products from the developing world and instead would only be allowed to charge tariffs on amount of agricultural imports exceeding specific limits.

Reduction in red tape at international borders: It aims to reduce red-tapism to facilitate trade by reforming customs bureaucracies and formalities.

Trade Facilitation in Services (TFS) Agreement:

Recently, India submitted a legally vetted proposal on Trade Facilitation in Services (TFS) Agreement, a global services pact on the lines of the TFA in Goods to the WTO. Now the proposal for TFS Agreement will be taken up by an expert committee at the WTO headquarters in Geneva and later it will be put up for discussion among all the WTO members.

It aims to ease norms for movement of skilled workers across borders for short-term work, ensure portability of social security contributions, single window mechanism for foreign investment approvals and cross-border insurance coverage to boost medical tourism.

TFA Implementation

Developed countries have committed to apply the substantive portions of the TFA from the date it takes effect.

Developing countries and least-developed countries (LDCs), meanwhile, will only apply those substantive provisions of the TFA which they have indicated they are in a position to do so from the date of the TFA’s entry into force. LDCs were given an additional year to do so. These commitments are set out in the submitted Category A notifications.

Category B notifications from developing countries and LDCs list the provisions the WTO member will implement after a transitional period following the entry into force of the TFA.

Category C notifications contain provisions that a developing country or LDC designates for implementation on a date after a transition period and requiring the acquisition of implementation capacity through the provision and assistance of capacity building.

TFA Impact:

The implementation of the TFA in Goods has the potential to create US 1 trillion dollars’ worth of global economic activity and trade which may add 21 million new jobs and lower the cost of doing international trade by 10 to 15 per cent.

TFA will help India’s ongoing reforms to bring in simplification and enhanced transparency in cross border trade in goods. It will further help India to boost economic growth by reducing trade costs and supporting its integration into the global economy.

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